My game backup CD image is 700mb in size, but when burnt to a CD it only occupies 400mb. Where did the extra 300mb go?

When there is a very large discrepancy between the initial image size and the final size of your burnt CD, it is usually because the image file also contains the game's audio sound track. Because the space occupied by audio tracks isn't represented in the same way as ordinary computer data it appears as though there is much less data on the final CD than there really is.

To witness this effect with your own eyes, try inserting an audio CD into your CD drive and see if you can find out how much space is being utilised by the tracks using the properties menu.